On September 28, 2016, the United States Securities and Exchange Commission (the “SEC”) voted to propose an amendment to its rules1 to shorten the standard settlement cycle for most broker-dealer securities transactions conducted in the U.S. public equities and corporate bond markets from three business days (referred to as “T+3” settlement) to two business days (referred to as “T+2” settlement).2 This marks the first change to the standard settlement cycle in the U.S. markets in 23 years, when the SEC adopted a rule that reduced the cycle from five business days (T+5) to three business days (T+3). The proposal follows the October 2014 harmonization of the T+2 settlement cycle for securities transactions in most European markets, with Liechtenstein remaining the only European market that has not yet migrated, or set a migration date, to T+2 settlement. Of particular note, the shortening of the securities settlement cycle will also serve to shorten the time period between the pricing and closing of most public offerings in the U.S. capital markets to two business days.
The SEC’s release relating to the proposed rule includes a request for comments, which must be submitted on or prior to December 5, 2016. While the SEC did not set a firm compliance date as part of the proposal, it did indicate that it will consider the industry-supported target of September 5, 2017 when setting a final compliance date.
If you have questions about the SEC’s rules applicable to securities settlement cycles for U.S. public equities and corporate bonds, please contact your Seward & Kissel Capital Markets Group attorney.
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1 Rule 15c6-1(a) under the Securities Exchange Act of 1934.
2 Other securities and markets are also affected. See SEC Release No. 34-78962 (September 28, 2016), which can be accessed at https://www.gpo.gov/fdsys/pkg/FR-2016-10-05/pdf/2016-23890.pdf
